Taxes

Roth IRAs

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A Roth Individual Retirement Account (IRA) allows you to save money on a tax-free basis, provided you meet the eligibility requirements and the holding period rules.

The Roth IRA allows for regular nondeductible contributions up to $4,000 in 2007 (provided you have earned income). Roth IRAs present an opportunity to receive tax-free income when the funds are withdrawn. The $4,000 limit is reduced if modified adjusted gross income (AGI) is above $156,000 if filing a joint return, ($99,000 if single) and is eliminated if modified AGI is above $166,000 for joint returns ($114,000 if single). The dollar limit is reduced for amounts contributed to a traditional IRA. In addition to regular IRA contributions, special catch-up contributions can be made annually to both traditional and Roth IRAs if you are at least age 50 by the end of the calendar year. For individuals that meet this age requirement, the regular contribution is increased by $1,000 in 2007. This catch-up contribution is based solely on your age, and is not affected by the amount of contributions you have made to an IRA in the past.

Tax-free distributions may be made from a Roth IRA if held for at least five years and if made after age 59½ , because of death or disability or for ‘first-time homebuyers’ (subject to a $10,000 lifetime limit).

The required minimum distribution rules for traditional IRAs do not apply to Roth IRAs. Distributions from Roth IRAs need not begin at age 70½.